Malta or Gibraltar: The QROPS question

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Written By Saeed Maleki

With their strong financial standing, English-speaking populations and internationally recognised pension regulators, Gibraltar and Malta have both emerged as leading QROPS jurisdictions to transfer a UK pension scheme.

Both countries have the skill, knowledge and resources to securely operate and invest your QROPS fund – but the question remains, which is the better option for your needs?

First, a look at the similarities. Both jurisdictions offer QROPS holders:

–          Up to 30% as tax-free lump sum

–          Flexible and wide-ranging investment opportunities

–          No “death taxes,” IHT or lifetime allowance limits

–          Ability to consolidate numerous pension schemes

–          Ability to receive income in currency of your choice – with low tax on that income

Double taxation agreements

One of the key differences is how the two countries tax pension income.

Whilst Malta taxes income at rates of up to 35%, the country has numerous, far-reaching Double Taxation Agreements (DTA) with countries, meaning if one is in place with the jurisdiction of your residency, you will not be taxed twice on your income.

This potentially means an individual pays no income tax on their pension income, in the case of residency in a no tax jurisdiction such as the UAE.

On the other hand, Gibraltar taxes all pension income at a low base rate of 2.5%, meaning you could pay two low taxes.

Other considerations

Usually the choice between the two countries depends on whether a DTA is in place, yet in total there are five main factors to consider which may make a Gibraltar QROPS the preferable option:

  1. Gibraltar enjoys a low rate of tax of 2.5%. If there is no DTA with Malta and your country of residence, then it may be a better option to pay the low Gibraltar tax and income tax in your country of residence.
  2. Self-investment is permitted in Gibraltar – meaning you can benefit from control over your pension investments. This also means nonstandard investments are more easily made in Gibraltar. Self-investment is not permitted in Malta.
  3. Borrowing is permitted in a Gibraltar QROPS, but not in a Maltese.
  4. Tax returns are required in Malta which may add to cost – but again not in Gibraltar.
  5. If the resident is located closer to Gibraltar – for example Spain – Gibraltar may be the best option.

As the list shows, there are many factors to consider when choosing between a Gibraltar and Malta QROPS, which is why seeking professional advice from a regulated independent financial advice is of paramount importance.

You will need to look at all the considerations mentioned above with a professional to ensure the best jurisdiction is chosen for your circumstances.

An IFA can further outline the differences, situate the differences to your retirement of each option, and talk you through the best option for your needs.